SCA Hygiene Products Aktiebolag SCA Personal Care, Inc. v. First Quality Baby Products, LLC
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Full Opinion
Opinion for the court filed by Chief Judge PROST in which Circuit Judges NEWMAN, LOURIE, DYK, O’MALLEY, and REYNA join. Opinion concurring-in-part, dissenting-in-part filed by Circuit Judge HUGHES in which Circuit Judges MOORE, WALLACH, TARANTO, and CHEN join.
We convene en banc to resolve whether, in light of the Supreme Court’s recent decision in Petrella v. Metro-Goldwyn-Mayer, Inc., — U.S. -, 134 S.Ct. 1962, 188 L.Ed.2d 979 (2014), laches remains a defense to legal relief in a patent infringement suit. We conclude that Congress codified a laches defense in 35 U.S.C. § 282(b)(1) that may bar legal remedies. Accordingly, we have no judicial authority to question the law’s propriety. Whether Congress considered the quandary in Pe-trella is irrelevant — in the 1952 Patent Act, Congress settled that laches and a time limitation on the recovery of damages can coexist in patent law. We must respect that státutory law.
Nevertheless, we must adjust the laches defense in one respect to harmonize it with Petrella and other Supreme Court precedent. We emphasize that equitable principles apply whenever an accused infringer seeks to use laches to bar ongoing relief. Specifically, as to injunctions, considerations of laches fit naturally within the eBay framework. In contrast; Menendez v. Holt, 128 U.S. 514, 9 S.Ct. 143, 32 L.Ed. 526 (1888), and Petrella counsel that laches will only foreclose an ongoing royalty in extraordinary circumstances.
I. BackgRound
The present dispute arose out of litigation concerning adult incontinence products. SCA alleges that First Quality, a competitor in the adult incontinence products market, infringes U.S. Patent No. 6,375,646 ('646 patent). SCA first contended that First Quality’s Prevail® All NitesTM product infringes the '646 patent in a letter sent to First Quality on October 31, 2003. The correspondence explained:
It has come to our attention that you are making, selling and/or offering for sale in the United States absorbent pants-type diapers under the name Prevail® All Nites™. We believe that these products infringe claims of [the '646 patent].
We suggest that you study [the '646 patent]. If you are of the opinion that the First Quality Prevail® All Nites™ absorbent pants-type diaper does not infringe any of the claims of this patent, please provide us with an explanation as to why you believe the products do not infringe. If you believe that the products do infringe, please provide us with your assurance that you will immediately stop making and selling such products.
J.A. 544.
First Quality responded on November 21, 2003 and claimed the patent was invalid:
As you suggested, we studied [the '646 tent].... In addition, we made a cursory review of prior patents and located U.S. Patent No. 5,415,649, (“the '649 Patent”), which was filed in the United States on October 29, 1991 and is therefore prior to your client’s '646 Patent. A review of Figs. 3 and 4 of the prior '649 Patent reveals the same diaper construction claimed by the '646 Patent. Thus, the prior '649 Patent invalidates your client’s '646 Patent. As you know, an invalid patent cannot be infringed.
J.A. 547. SCA and First Quality ceased communications regarding the '646 patent after First Quality’s response. However, on July 7, 2004, SCA requested reexamination of the '646 patent in light of the '649 patent. SCA did not notify First Quality of the reexamination because, in SCA’s view, U.S. Patent and Trademark Office (“PTO”) reexaminations are public and First Quality could follow the proceedings itself. Yet, from First Quality’s point of view, SCA dropped its infringement allega
The PTO instituted reexamination on the '646 patent and, on March 27, 2007, confirmed the patentability of all twenty-eight original claims and issued several other claims SCA added during reexamination. Meanwhile, First Quality invested heavily in its protective underwear business. In 2006, First Quality expanded its line of adult incontinence products. In 2008, First Quality acquired Tyco Healthcare Retail Group LP, which had several lines of competing products, and in 2009 First Quality spent another $10 million to purchase three more lines of protective underwear products. SCA was aware of First Quality’s activities, but never mentioned the '646 patent to First Quality during this time.
On August 2, 2010 — over three years after reexamination concluded — SCA filed a complaint alleging that First Quality infringes the '646 patent. Service of the complaint was the first time in nearly seven years that SCA had communicated with First Quality regarding the '646 patent. The district court proceeded with discovery and issued a claim construction order. First Quality then moved for partial summary judgment of noninfringement and for summary judgment of laches and equitable estoppel. The district court granted First Quality’s motion as to laches and equitable estoppel and dismissed the noninfringement motion as moot.
SCA appealed, and on September 17, 2014, a panel of this court affirmed the district court’s opinion on laches, but reversed as to equitable estoppel. See SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 767 F.3d 1339 (Fed. Cir.2014) (“Panel Opinion”). On laches, the panel rejected SCA’s argument that the Supreme Court’s Petrella decision abolished laches in patent law, reasoning instead that the panel was bound by this court’s prior en banc opinion in A.C. Aukennan Co. v. R.L. Chaides Construction Co., 960 F.2d 1020 (Fed.Cir.1992) (en banc), and that Petrella left Aukerman intact. Panel Opinion at 1345. As to the delay element, the panel opinion held that while “SCA was not required to provide notice of the reexamination to First Quality,” “SCA remained silent for more than three years after the patent came out of reexamination.” Id. at 1346. “Given the circumstances, SCA should have been prepared to reassert its rights against First Quality shortly after the '646 patent emerged from reexamination.” Id. Therefore, the panel concluded that “SCA has failed to raise a genuine issue of material fact regarding the reasonability of its delay.” Id.
With respect to the prejudice element of laches, the panel affirmed the district court’s analysis. Specifically, the panel agreed that First Quality made a number of significant capital expenditures in its adult incontinence business, and that First Quality likely would have “restructured its activities to minimize infringement liability if SCA had brought suit earlier.” Id. at 1347. Because SCA did not present any contrary evidence, the panel held that “SCA has not identified any evidence that raises a genuine issue of material fact regarding First Quality’s presumed economic prejudice.” Id. at 1348. And although the district court did not explicitly weigh the equities in determining that laches applied, the panel concluded the error was harmless. Id. Thus, the panel affirmed the district court’s grant of summary judgment on laches.
(a) In light of the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, — U.S. -, 134 S.Ct. 1962, 188 L.Ed.2d 979 (2014) (and considering any relevant differences between copyright and patent law), should this court’s en banc decision in AC. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed.Cir.1992), be overruled so that the defense of laches is not applicable to bar a claim for damages based on patent infringement occurring within the six-year damages limitations period established by 35 U.S.C. § 286?
(b) In light of the fact that there is no statute of limitations for claims of patent infringement and in view of Supreme Court precedent, should the defense of laches be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief? See, e.g., Lane & Bodley Co. v. Locke, 150 U.S. 193, 14 S.Ct. 78, 37 L.Ed. 1049 (1893).
SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, No. 2013-1564, 2014 WL 7460970, at *1 (Fed.Cir. Dec. 30, 2014) (granting en banc review). Following briefing, including numerous amicus briefs, .we held oral argument on June 19, 2015.
We have jurisdiction under 28 U.S.C. § 1295(a)(1).
II. Viability of Laches AfteR Petrella
A
SCA contends that, after the Supreme Court’s decision in Petrella, laches is no longer available as a defense to patent infringement within the six-year damages recovery period. We last addressed our laches law en banc in Aukerman. There, we set out five rules regarding the laches defense:
1. Laches is cognizable under 35 U.S.C. § 282 (1988) as an equitable defense to a claim for patent infringement.
2. Where the defense of laches is established, the patentee’s claim for damages prior to suit may be barred.
3. Two elements underlie the defense of laches: (a) the patentee’s delay in bringing suit was unreasonable and inexcusable, and (b) the alleged in-fringer suffered material prejudice attributable to the delay. The district court should consider these factors and all of the evidence and other circumstances to determine whether equity should intercede to bar pre-filing damages.
4. A presumption of laches arises where a patentee delays bringing suit for more than six years after the date the patentee knew or should have known of the alleged infringer’s activity.
5. A presumption has the effect of shifting the burden of going forward*1318 with evidence, not the burden of persuasion.
Aukerman, 960 F.2d at 1028.
Four different portions of Aukerman’s reasoning are especially relevant to this case. First, we determined in Aukemnan that laches was codified in 35 U.S.C. § 282. Aukemnan explained that, “[a]s a defense to a claim of patent infringement, laches was well established at the time of recodi-fication of the patent laws in 1952.” Id. at 1029. We also credited P.J. Federico’s Commentary on the New Patent Act for its observation that the second paragraph of § 282 includes “equitable defenses such as laches, estoppel and unclean hands.” Id. (quoting P.J. Federico, Commentary on the New Patent Act, 35 U.S.C.A. 1, 55 (West 1954) (hereinafter Federico Commentary )).
Second, Aukerman addressed the argument that laches conflicts with 35 U.S.C. § 286, which limits recovery of damages to the six years prior to the complaint. We explained that “[i]n other areas of our jurisdiction, laches is routinely applied within the prescribed statute of limitations period for bringing the claim.” Id. at 1030 (citing Cornetta v. United States, 851 F.2d 1372 (Fed.Cir.1988) (en banc) (military pay); Reconstruction Finance Corp. v. Harrisons & Crosfield Ltd., 204 F.2d 366 (2d Cir.), cert. denied, 346 U.S. 854, 74 S.Ct. 69, 98 L.Ed. 368 (1953) (breach of contract)). Moreover, we observed that § 286 (or a virtually identical analogue) “has been in the patent statute since 1897,” and that, “[wjithout exception, all circuits recognized laches as a defense to a charge of patent infringement despite the reenactment of the damages limitation in the 1952 statute.” Id. Aukerman also noted that “section 286 is not a statute of limitations in the sense of barring a suit for infringement.” Id. Rather, “the effect of section 286 is to limit recovery to damages for infringing acts committed within six years of the date of the filing of the infringement action.” Id. Finally, we reasoned that laches and a statute of limitations are not inherently incompatible. “By section 286, Congress imposed an arbitrary limitation on the period for which damages may be awarded on any claim for patent infringement. Laches, on the other hand, invokes the discretionary power of the district court to limit the defendant’s liability for infringement by reason of the equities between the particular parties.” Id. (emphasis in original).
Third, we rejected the argument “that laches, by reason of being an equitable defense, may be applied only to monetary awards resulting from an equitable accounting, not to legal claims for damages.” Aukerman, 960 F.2d at 1031. According to the Aukerman court, the merger of law and equity courts allowed laches to bar legal relief. When in 1915 Congress enacted 28 U.S.C. § 398 — which authorized parties to plead equitable defenses at law without having to file a separate bill in equity — “laches became available to bar legal relief, including patent damage actions.” Id. We also found persuasive the fact that Federal Rule of Civil Procedure 8(c) recognizes laches as a defense in civil actions. Id.
Fourth, Aukerman considered whether laches bars recovery of pre-filing damages only, or whether it precludes the entire suit. In ruling that laches prohibits recovery of pre-filing damages only, Aukerman relied on the Supreme Court’s Menendez decision. Aukerman quoted the following portion of Menendez:
Mere delay or acquiescence cannot defeat the remedy by injunction in support of the legal right, unless it has been continued so long[,] and under such eir-cumstances[,] as to defeat the right itself. ... Acquiescence[,] to avail[,] must*1319 be such as to create a new right in the defendant....
So far as the act complained of is completed, acquiescence may defeat the remedy on the principle applicable when action is taken on the strength of encouragement to do it[;] but so far as the act is in progress]],] and lies in .the future, the right to the intervention of equity is not generally lost by previous delay, in respect to which the elements of an estoppel could rarely arise.
Aukerman, 960 F.2d at 1040 (quoting Menendez, 128 U.S. at 523-24, 9 S.Ct. 143.) Aukerman was motivated by preserving the distinction between laches— which bars only pre-suit damages — and equitable estoppel — which bars the entire suit. Id. Estoppel, which does not necessarily involve delay in bringing suit, requires “statements or conduct of the pat-entee which must ‘communicate ... in a misleading way’ ... that the accused in-fringer will not be disturbed by the plaintiff patentee in the activities in which the former is currently engaged.” Id. at 1042. Aukerman explained that the “stated difference in the effect of laches and estoppel has served well to emphasize that more is required in the overall equities than simple laches if an alleged infringer seeks to wholly bar a patentee’s claim.” Id. at 1040. The court dismissed a rule by which laches could bar all relief “in egregious circumstances.” Id.
For over two decades, Aukerman governed the operation of laches in patent cases. However, last year in Petrella the Supreme Court held that laches was not a defense to legal relief in copyright law. Petrella calls portions of Aukerman’s reasoning into question, necessitating our present en banc reconsideration of laches.
Petrella involved an assertion that Metro-Goldwyn-Mayer’s (“MGM”) critically-acclaimed 1980 film Raging Bull infringed a copyright in a 1968 screenplay authored by Frank Petrella. Frank Petrella’s daughter, Paula Petrella (“Petrella”), renewed the copyright in 1991, but did not contact MGM until seven years later. Pe-trella, 134 S.Ct. at 1971. Over the next two years, Petrella and MGM exchanged letters concerning Petrella’s copyright claim. Id. Petrella then went silent, and did not file suit until January 6, 2009, about nine years after her last correspondence with MGM. Id. To dispose of the suit, MGM moved for summary judgment of laches, which the district court granted and the Ninth Circuit affirmed.
However, the Supreme Court reversed, holding that laches is no defense to a copyright infringement suit brought within the Copyright Act’s statutory limitations period. Fundamentally, the Supreme Court reasoned that “the copyright statute of limitations, § 507(b), itself takes account of delay,” crowding out the judiciary’s power to decide whether a suit is timely. Id. at 1973. According to the Court, “[ljaches ... originally served as a guide when no statute of limitations controlled the claim.” Id. at 1975. Historically, “laches is a defense developed by courts of equity; its principal application was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitation.” Id. at 1973. Laches is thus “gap-filling, not legislation-overriding.” Id. at 1974. In this respect, separation of powers concerns drove the result in Petrella. Petrella consequently held that “in face of a statute of limitations enacted by Congress, laches cannot be invoked to bar legal relief.” Id. Therefore, under Petrella, “[t]o the extent that an infringement suit seeks relief solely for conduct occurring within the limitations period ... courts are not at liberty to jettison Congress’ judgment on the timeliness of suit.” Id. at 1967.
Petrella also addressed the extent to which laches should affect equitable relief. The Court explained: “In extraordinary circumstances, however, the consequences of a delay in commencing suit may be of sufficient magnitude to warrant, at the very outset of the litigation, curtailment of the relief equitably awardable.” Id. at 1977. Petrella then contrasted a Sixth Circuit case involving a copyrighted architectural design and the facts in Petrella. In the Sixth Circuit case, Chirco v. Crosswinds Communities, Inc., 474 F.3d 227 (6th Cir.2007), the plaintiffs “would not be entitled to an order mandating destruction of the housing project” embodying the copyrighted design because “the plaintiffs knew of the defendants’ construction plans before the defendants broke ground, yet failed to take readily available measures to stop the project; and the requested relief would work an unjust hardship upon the defendants and innocent third parties.” Petrella, 134 S.Ct. at 1978 (emphasis in original) (internal quotation marks omitted). In Petrella, however, “Petrella notified MGM of her copyright claims before MGM invested millions of dollars in creating a new edition of Raging Bull. And the equitable relief Petrella seeks — e.g., disgorgement of unjust gains and ah injunction against future infringement — would not result in total destruction of the film, or anything close to it.” Id. (emphasis in original) (internal quotation marks omitted). Furthermore, the Court reasoned that “[allowing Petrella’s suit to go forward will put at risk only a fraction of the income MGM has earned during that period and will work no unjust hardship on innocent third parties, such as consumers who have purchased copies of Raging Bull. The circumstances here may or may not (we need not decide) warrant limiting relief at the remedial stage, but they are not sufficiently extraordinary to justify threshold dismissal.” Id. (citation omitted).
Nonetheless, the Supreme Court continued: “Should Petrella ultimately prevail on the merits, the District Court, in determining appropriate injunctive relief and assessing profits, may take account of her delay in commencing suit.” Id. The Court then laid out several considerations for the district court. In particular, the “court should closely examine MGM’s alleged reliance on Petrella’s delay.” Id. “This examination should take account of MGM’s early knowledge of Petrella’s claims, the protection MGM might have achieved through pursuit of a declaratory judgment action, the extent to which MGM’s investment was protected by the separate-accrual rule, the court’s authority to order injunctive relief on such terms as it may deem reasonable, and any other considerations that would justify adjusting injunctive relief or profits.” Id. at 1978-79 (internal quotation marks and citation omitted). In conclusion, the Court assured that, “on the facts thus far presented,” Petrella would remain entitled to an ongoing royalty. Id. at 1979 (“Whatever adjustments may be in order in awarding injunctive relief, and in accounting for MGM’s gains and profits, on the facts thus far presented, there is no evident basis for immunizing MGM’s present and future uses of the copyrighted work, free from any obligation to pay royalties.”).
Still, Petrella clearly casts doubt on several aspects of Aukerman. The following sections reexamine the availability of lach-es to bar recovery of damages incurred within the six-year limitations period.
B
First, we consider the character of 35 U.S.C. § 286. Section 286 states, in relevant part: “Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.” 35 U.S.C. § 286. The parties and amici fervently debate whether § 286 is a statute of limitations or a damages limitation. By its terms, § 286 is a damages limitation. The statute does not preclude bringing a claim — instead, it limits a pat-entee’s damages recovery to compensation for only the last six years of infringement. See Standard Oil Co. v. Nippon Shokubai Kagaku Kogyo Co., 754 F.2d 345, 347-48 (Fed.Cir.1985).
However, this distinction is irrelevant to the resolution of this case under Petrella. As discussed above at II.A, Petrella focuses on the fact that, in enacting a statute of limitations, Congress has spoken on the timeliness of copyright infringement damages claims. Thus, the question under Petrella is whether Congress has prescribed a time period for recovery of dam- . ages. Section 286 is one such prescription. In § 286, Congress provided a six-year time period for recovery of damages. Given that laches also considers the timeliness of damages claims, § 286 — a damages-barring time provision — invokes Petrella’s logic at least as much as, and perhaps more than, a statute of limitations. Petrella, 134 S.Ct. at 1973 (“[T]he copyright statute of limitations, § 507(b), itself takes account of delay.”). Moreover, because patent infringement is a continuous tort, there is no relevant functional difference between a damages limitation and a statute of limitations. We therefore see no substantive distinction material to the Petrella analysis between § 286 and the copyright statute of limitations considered in Petrella.
C
Next, we determine that Congress codified a laches defense in 35 U.S.C. § 282(b)(1). Section 282(b)
The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded:
(1) Noninfringement, absence of liability for infringement or unenforceability.
(2) Invalidity of the patent or any claim in suit on any ground specified in part II as a condition for patentability.
*1322 (8) Invalidity of the patent or any claim in suit for failure to comply with—
(A) any requirement of section 112, except that the failure to disclose the best mode shall not be a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable; or
(B) any requirement of section 251.
(4) Any other fact or act made a defense by this title.
By its plain terms, § 282 broadly sets out defenses available in a patent infringement or validity suit. Rather than enumerate specific defenses, subsection (1) lists categories of defenses — “[n]oninfringement, absence of liability for infringement or un-enforceability.” Subsections (2) and (3) follow this pattern, referring to invalidity based on “any ground specified in part II as a condition for patentability,” “any requirement of section 112,” and “any requirement of section 251.” And § 282(b) concludes with a catch-all provision in subsection (4): “[a]ny other fact or act made a defense by this title” is a defense within § 282(b).
The House and Senate Reports on § 282 confirm that Congress intended § 282 to have broad reach. Only one sentence in each Report describes § 282(b), but both endorse an expansive interpretation of the subsection. The Senate Report explains that “[t]he five defenses named in R.S. 4920 are omitted and replaced by a broader paragraph specifying defenses in general terms.” S.Rep. No. 82-1979 at 8-9 (1952), 1952 U.S.C.C.A.N. 2394, 2422. Likewise, the House Report clarifies that “[t]he defenses to a suit for infringement are stated in general terms, changing the language in the present statute, but not materially changing the substance.”
Contemporary commentary by “P.J. Federico, a principal draftsman of the 1952 recodification,” Diamond v. Chakrabarty, 447 U.S. 303, 321, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980), reveals that the “broader” and “general” § 282 codified the laches defense. Federico’s Commentary on the New Patent Act, which appears as a prologue to Title 35 in West’s initial publication of the statute, states:
The defenses which may be raised in an action involving the validity or infringement of a patent are specified in general terms, by the second paragraph of section 282, in five numbered items. Item 1 specifies “Noninfringement, absence of liability for infringement, or unenforce-ability” (the last word was added by amendment in the Senate for greater clarity); this would include the defenses such as that the patented invention has not been made, used or sold by the defendant; license; and equitable defenses such as laches, estoppel and unclean hands.”
Federico Commentary (emphases added).
The dissent criticizes our reliance on Federico, Dissent at 1337-38, but the Supreme Court has trusted Federico as an authority on the Patent Act at least thrice. See Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 28, 117 S.Ct. 1040, 137 L.Ed.2d 146 (1997) (citing 2 D. Chisum, Patents § 8.04[2], pp. 63-64 (1996) (discussing Federico Commentary)); Diamond, 447 U.S. at 321, 100 S.Ct. 2204 (citing Hearings on H.R. 3760 before Subcommittee No. 3 of the House
After enactment of the law, West Publishing Company aske